Pg 37 showed outstanding amounts of their purchase of raw materials, boxes, etc.

Transcription

1 M/s. Magnum Ceramic Pvt. Ltd., Rafaleshwar GIDC, Plot No. 207/25, National Highway 8A, Morbi (hereinafter referred to as the assessee ) are engaged in the manufacture of Ceramic Porcelain Floor Tiles falling under Chapter 69 of the Central Excise Tariff Act, 1985 and are registered with the Central Excise having Registration no. AAFCM2216GXM001. BRIEF FACTS 2. On the basis of intelligence that the assessee was indulging in clandestine removal of finished goods, a team of officers of the Headquarters Preventive unit, Central Excise Commissionerate, Rajkot visited and searched the factory premises of assessee on in presence of two panchas and Shri Veljibhai Khodabhai Patel (Ughreja), Director of the assessee (hereinafter referred to as the director ). During the course of search, various incriminating documents/records relating to production, sales, purchase, bank transactions etc. were found which were resumed under Panchnama. 3. A statement of the director was recorded on under Section 14 of the Central Excise Act, 1944, wherein he, inter alia stated that he was the Director of the assessee and were engaged in manufacture of ceramic porcelain floor tiles of various sizes and was looking after all the activities like production, sales, management and financial transaction. 4. The director was questioned about some data appearing in pages of a green file among the documents mentioned in the above Panchnama. As per his reply:- Pg 35 showed the average production figures of various grades of tiles (premium, commercial, utility, destroyed), but he could not remember which period the figures pertained to. Pg 37 showed outstanding amounts of their purchase of raw materials, boxes, etc. Pg 39 showed receipts through Bank and courier, for sale of tiles. This included sales to regular customers, but he was not sure if payments for these were made only through Banks. However, all receipts through Bank pertained to sales reflected in their Book of Accounts. Payments through courier pertained to boxes of tiles sent to customers as samples during , which had not been accounted for. Pg showed Bank account and Bank Statements. Pg 45 had details of their purchase of Magnesite and Orange Brown Color. Such sales have neither been accounted for, nor have invoices been prepared. Though commission paid to courier is shown, the director could not specify which courier was engaged, as such transactions were listed after April The director said that it was routine and essential for them to send samples to regular customers. But as these were not documented, he could not provide the information sought on such sales. He admitted his mistake, and assured that this would not happen hereafter. He submitted a cheque bearing No of Rs. 4,50,000/- of Indian Overseas Bank, Morbi Branch, Morbi towards Central Excise duty payable on such sales. He assured to pay remaining Central Excise duty, if any. 6. A statement of Shri Kiritkumar Vasarambhai Patel, Proprietor of M/s. Navrang Tiles, Opp. Shekhpir, Sarkhej, Ahmedabad (hereinafter referred to as Shri Kiritkumar ) was also recorded under Section 14 of the Central Excise Act, 1944 on He was shown a hand written paper showing the figure Rs against Navrang Tiles, regarding cash account dated maintained by the assessee which was seized under Panchnama dated 1

2 Shri Kiritkumar admitted that he used to place orders with the assessee on phone, and received the goods by local trucks, for which he paid transportation charges without proper documentation. During his personal visits to Morbi, Shri Kiritkumar would return the invoices to the director. In effect, he was procuring goods without Invoices and proper documentation. He was also unable to provide much of the information sought, due to lack of records. 7 A statement of Shri Ankur Ganeshbhai Patel, Proprietor of M/s. Balaji Tiles, Bhavani Peth, Hanumannagar, Solapur (hereinafter referred to as Shri. Ankur ) was also recorded under Section 14 of the Central Excise Act, 1944 on He was shown a hand written paper for the amount Rs. 1,10,500/- in the name of Balaji Tiles, regarding cash account dated maintained by the assessee which was seized under Panchnama dated He was receiving required goods /floor tiles from the assessee under invoices, and he was returning the said invoices to the director personally at the time of his visit to Morbi. By adopting this modus operandi, he had made purchases without invoice from the assessee. through M/s. Shree Kankeshwar Transport or M/s. Shree Patidar Roadlines etc, and later destroyed the lorry receipts. He admitted to the above and put his dated signature acknowledging the same on the said paper which was seized from the assessee. 8 From the facts narrated above, it is evident that the assessee has cleared the Ceramic Glazed floor tiles without raising bill and without accounting the same in their record, the details of which were retrieved from the papers contained in a file seized as per sr. no. 11 of Annexure A to Panchnama dated Shri Veljibhai Ughreja, the director, of the assessee has also confessed in his statements recorded on and that they have not prepared the bills for such unaccounted transactions, and the value of the goods cleared without payment of duty mentioned on the papers contained in above said file were the transactional value and there was no difference between the said transaction value and the value of their goods determined after deducting abatement from their M.R.P. Further, the fact of unaccounted clearances has also been corroborated under the statements of Shri. Kiritkumar and Shri. Ankur. 9. Thus, the assessee has cleared the ceramic glazed floor tiles without preparing invoice and without payment of Central Excise duty as per following details: Sr. No. Amount of Sales (In Rs.) Particulars Remarks (Sr.no. on left hand side of page no.39 of file as per Sr.No.11 of Annexure A to Panchnama dtd ) ,22, Sales during year ,68, Sales made to Vishnu Marble , Sales made to Nanak Trading , Sales made to Navrang Tiles ,10, Sales made to Balaji Tiles , Sales made to Giriraj Sanitary ,00, Sales made to Hariom Ceramics 08. 4, Sales made to Kiritbhai Bhimji 14 44,42, Total sales 12 2

3 Therefore, Value of goods cleared unaccounted: Rs. 44,42,293,00 Central excise duty at the rate of 10%: Rs. 4,44, Education 2% Rs. 8, Secondary & Higher Secondary Education 1% Rs. 4, Total duty payable (Ex Duty +2% + 1%) Rs. 4,57, (under proviso to Section 11A of the Central Excise Act, 1944). 10. From the facts narrated in the foregoing paras, it is seen that the said assessee has contravened the provisions of: (i) Rule 4 read with Rule 8 of Central Excise Rules, 2002, inasmuch as they have removed the excisable goods without discharging the Central Excise duty in the manner prescribed under the said Rules; (ii) Rule 6 of the Central Excise Rules, 2002, inasmuch as they failed to assess the duty payable on the excisable goods cleared by them; (iii) Rule 10 of the Central Excise Rules, 2002, inasmuch as they have failed to maintain true and correct account of the goods manufactured and cleared from their factory; (iv) Rule 11 of the Central Excise Rules, 2002, inasmuch as they failed to issue Central Excise invoice in respect of the goods manufactured and cleared from their factory; (v) Rule 12 of the Central Excise Rules, 2002, inasmuch as they failed to file the prescribed proper Return showing the correct value of their production and clearance. 11. It is also evident that the director was the person concerned in manufacturing, keeping, depositing, selling, clearing etc. of the excisable goods which he knew or had reasons to believe that the same was liable for confiscation and hence he is liable to be penalized under rule 26 of Central Excise Rules, Shri Kiritkumar and Shri Ankur were also willful participants in this activity, with their full knowledge of the subversion and its consequences. 12. Accordingly, M/s. Magnum Ceramics Pvt. Ltd., Rafaleshwar GIDC, Plot No. 207/25, National Highway 8A, Morbi was issued a Show Cause notice asking them as to why; (i) Central Excise duty of Rs. 4,57, (including Education Cess & S. & H.E. Cess) (Rupees Four lakhs, Fifty Seven Thousand, Five Hundred and Fifty Six only)should not be recovered from them under the proviso to Section 11A(1) of the Central Excise Act,1944; and the amount of Rs. 4,50,000/- already deposited by them voluntarily against the above duty should not be appropriated; (ii) the interest at appropriate rates on the aforesaid duty amount should not be recovered from them under Section 11AB of the Central Excise Act, 1944; (iii) penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002 should not be imposed upon them; 13. Also, Shri Veljibhai Khodabhai Patel (Ughreja), Director of M/s. Magnum Ceramics Pvt. Ltd., Morbi, Shri Kiritkumar Vasarambhai Patel, Proprietor of M/s. Navrang Tiles, Opp. Shekhpir, Sarkhej, Ahmedabad and Shri Ankur Ganeshbhai Patel, Proprietor of M/s. Balaji Tiles, Bhavani Peth, Hanumannagar, Solapur were issued Show Cause notice asking them as to why personal penalty should not be imposed upon each of them under Rule 26 of the Central Excise Rules, 2002, for the contraventions discussed in foregoing paras. 3

4 DEFENCE: 14. In their reply dated to the show cause notice, the assessee have presented the following submission in their defence:- 1) That the Central Excise Officers who visited their premises on for verification, have alleged that they have cleared goods valued at Rs /- without payment of Excise Duty of Rs /-. These allegations are totally baseless and pro-revenue. 2) That there is no truth or justification in the allegation of clearance of goods under parallel invoices or without payment of duty. They have not committed any breach of Central Excise rules or other laws in force at the time. Hence the demand for recovery of Rs /- is incorrect, unjustified, and without authority in law. 3) That the charge is levelled on the basis of the statements of various persons recorded by the Department authorities and also on the basis of various documents seized and recovered by the said authorities during investigation. They have requested for examination of facts and evidences from the following angles:- (a) What is the evidence brought on record by the Revenue in support of allegation of illicit removal of excisable goods? (b) Whether such evidence was adequate to conclude beyond a reasonable doubt that a unit had really indulged in such activity resulting in the evasion of duty? (c) What was the correct factual position in view of the evidence brought on record by the assessee in such a case? That the evidence adduced by the Department must be independent and documentary, and not merely in the form of confessional statements, loose papers, chits, notebooks etc recovered in questionable circumstances. Corroboration by independent evidence is a must. 4) That the decisions in the cases like TGL Poshak Vs. Commissioner of C. Ex., Hyderabad (140) ELT 187, M.T.K. Guruswamy Vs. Commissioner of Central Excise, Madurai (130) ELT 344, Commissioner of Central Excise, Chandigarh V/s Deshmesh Casting (P) Ltd (40) RLT 1077, Punjab Oil & Silicate Mills Vs. Collector of Central Excise (65) ELT 268. Suvarna Polymers Pvt. Ltd. Vs. Commissioner of Central Excise, Hyderabad (120) ELT 148, Rishab Refractories Pvt. Ltd. Vs. Commissioner of C. Ex., Chandigarh 1996 (87) ELT 93, Kirtibhai Maganbhai Patel Vs. Commissioner of Central Excise, Nagpur -2000(36) RLT 211, Deena Paints Vs. CCE, New Delhi (43) RLT 805, Ebenzer Rubbers Ltd. Vs. Collector of Central Excise, Ahmedabad (26) ELT 997, Shakti Chemical Industries Vs. Collector of Central Excise, Baroda (76) ELT 410, Kashmir Vanaspati (P) Ltd. Vs. Collector of Central Excise (39) ELT 655, Ashwin Vanaspati Industries Pvt. Ltd. Vs. Collector of Central Excise, 1992 (59) K I T 175, Gurpreet Rubber Industries Vs. Collector of C. Ex., Chandigarh (82) ELT 347 and T.M. Industries Vs. Collector of Central Excise (68) ELT 807 may be referred to and relied upon in this regard because by virtue of the above referred case law, it is clear that the Department must adduce evidence regarding procurement of raw-materials, use of inputs like power, electricity, water, and also regarding actual manufacture of goods and removal thereof by agencies like transporters and ultimately evidence regarding receipt of payment from the customer and also confirmation of the receipt of the goods by the customers have to be proved in such cases. In view of the matter, the procedure adopted by the department is illegal and hence the claim for the revenue may be dropped. 4

5 5) It is humbly requested that under the provisions of sub-rule (1) of Rule 25 of the Central Excise Rules 2002, read with provisions of Section 11 AC of the Central Excise Vet 1944, the penalty mentioned in the SCN may not be imposed, when the Duty demanded along with interest has been paid within 30 days from the date of issuance of the Notice. Also requested that penalty not be imposed on the Director of the assessee, Shri Kiritkumar and Shri Ankur in view of their cooperation in furnishing information in the matter. Personal Hearing: 15. Mr. Chetan Detharia, Chartered Accountant, attended the personal hearing on behalf of the assessee, the partner, Shri. Pramod and Shri. Bharat on and reiterated his defence submissions made on and requested to decide the case on merits. Findings : 16. I have carefully gone through the entire case records of the Show Cause Notice. I find that the assessee has been charged with clandestine removal of their finished goods viz. Ceramic Glazed Wall Tiles in the said Show Cause Notice. 17. I find that the assessee in their defence submission has argued on the following points, which require examination: i) the departmental officers have not come out with any solid evidence other than confessional statements, loose papers, chits, note-books etc. recovered in questionable circumstances. Corroboration of independent evidence is a must in such cases. ii) the assessee wants to know what evidence has been brought on record by the department in support of their above allegations, whether such evidence is adequate enough to prove the evasion indulged by them and what was the correct position in view of the evidence brought on record by the assessee. iii) the burden to prove illicit removal of excisable goods is on the department. iv) the department should not have relied upon the only evidence in the form of statements of various persons and that the Show Cause Notice has been issued only on the basis of such statements, which is wholly illegal and liable to be dropped. From the above contentions, I find that the main thrust of the arguments of the assessee is that there is no sufficient evidence on record to establish the charge of clandestine removal, for which the onus lies heavily upon the department. 18. I find from the Show Cause Notice and other related records that the case of clandestine removal has been booked consequent upon recovery of various incriminating documents/records relating to production, sales, purchase etc. from the premises of the Assessee, by the investigating departmental officers and the confessional statements of the partner of the Assessee supported by the statements of the customers to whom the unaccounted and non duty paid excisable goods were sold to. 19. The assessee has vehemently argued that evidence should not be merely in the form of confessional statements or loose papers, chits, note-books etc. Therefore, it is apparent that the fact of recovery of the parallel invoices, delivery Challans etc. which were not accounted in their books of accounts are not being disputed by the Assessee. In these circumstances, the onus to explain the presence of such unaccounted for documents in their factory gets shifted to the 5

6 Assessee. The defence is silent about this. However, I find from the statements recorded under section 14 of the Central Excise Act, 1944 that they have indeed given a plausible explanation regarding the presence of these unaccounted documents. In his statements dated and , Shri. Veljibhai Ughreja, Director of the Assessee has very clearly stated the modus operandi adopted by them to remove the excisable goods without payment of duty, which has been corroborated under the statements of Shri Kiritkumar and Shri Ankur as well. I am of the view that confessional statements can be relied upon for the purpose of establishing an offence, unless evidence shows that it was obtained under pressure, threat, duress, coercion etc. And I do not find any such allegation on the department by the Assessee that the statements were recorded using coercive methods. The statements too have not been retracted any time which proves my above finding. Hence, an admission, if clearly and unequivocally made, is the best evidence against the person making it. Moreover, I find that the Assessee have paid up Rs.4,50,000/- voluntarily and assured the payment of the remaining amount too, which proves the fact that they have accepted the allegations raised against them. 20. Therefore, the incriminating documents together with the confessional statements are substantive evidences for coming to a conclusion that the Assessee has committed the act of clandestine removal of excisable goods without payment of duty. My views are supported by Hon ble CESTAT, Ahmedabad s judgement in the case of M/s Aditi Re-rolling Mills Pvt. Ltd. Vs CCE, Bhavnagar [2009(245)E.L.T. 196 (Tri-Ahmd)]. Since it has been established from the foregoing paras that the department had enough evidence to allege the violations committed by the Assessee, the decisions relied upon by the Assessee in their defence submissions do not hold any relevance now and therefore, are not being discussed here. 21. In view of the foregoing discussions, I hold that the Assessee has cleared the finished excisable goods as detailed in the Show Cause Notice clandestinely with an intent to evade payment of duty and therefore, I confirm the demand of Rs. 4,57,556/ As regards the proposal for imposition of penalty under section 11AC of the Central Excise Act, 1944 readwith Rule 25 of the Central Excise Rules, 2002, I find that the Assessee, as held above, has suppressed the fact of manufacture and clearance of excisable goods from the department and cleared their goods without payment of duty by reason of fraud and by suppressing the material facts with an intent to evade payment of duty and therefore, rendered themselves liable to pay penalty equal to the duty so determined, readwith Rule 25 of the Central Excise Rules, The plea of the Assessee that since duty demanded alongwith interest has been paid within 30 days from the date of issuance of Show Cause Notice, penalty may not be imposed, I find that section 11AC provides, that where such duty as determined under sub-section (2) of section 11A, and the interest payable thereon under section 11AB, is paid within thirty days from the date of communication of the order of the Central Excise Officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent of the duty so determined: Provided further that the benefit of reduced penalty under the first proviso shall be available if the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso: Thus, the benefit of paying only 25% of the penalty imposed under this section is available only if the Assessee pays up the entire amount within thirty days from the date of communication of the adjudication order wherein the penalty amount is also determined. In the instant case, the Assessee has paid the duty amount alongwith interest after the issuance of the Show Cause Notice and therefore, the above benefit cannot be extended to them at this stage. 6

7 23. The remaining points for determination are whether the Director of the assessee, Shri Kiritkumar and Shri Ankur are liable to penalty under Rule 26 of Central Excise Rules, 2002 or not. They have requested for a lenient view in the matter on the grounds that they have co-operated with the department in this case. Rule 26 of Central Excise Rules, 2002 states that- Rule 26. Penalty for certain offences (1) Any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules, shall be liable to a penalty not exceeding the duty on such goods or two thousand rupees, whichever is greater. The director in the instant case, though fully aware of the law, kept, concealed and sold the goods under unauthorized invoice and evaded duty by using parallel numbers of invoice thus violated the provisions of Rule 10 of the Central Excise Rules, 2002, by not accounting for the goods in their account, Rule 11 of the Central Excise Rules, 2002, by issuing identical number to more than one invoices and sold the goods even without issuing invoices, thus he is liable for penalty under Rule 26 of the Central Excise Rules, The traders are in the business of purchase and sale of ceramic tiles for the last several years as admitted by them in their defence reply and in the instant case have purchased, kept, removed and sold the excisable goods which were purchased under unrecorded invoices, which they have admitted to have returned to the assessee, they purchased the goods, on which Central Excise duty was evaded, and they were in the knowledge of this practice and helped the assessee in the duty evasion and hence they are liable for penalty under Rule 26 of the Central Excise Rules, I find that the charges against the Assessee stand established in this case, as discussed in the foregoing paras and hence roles of the above said persons in this case relating to the clandestine removal of excisable goods without payment of Central Excise duty also stand established. Therefore, I hold that the penalties under Rule 26 of the Rules are rightly imposable upon the Director of the assessee, Shri Kiritkumar and Shri Ankur. Accordingly, I pass the following order: ORDER 1. I confirm the demand of Central Excise duty amounting to Rs. 4,57,556/- (Rupees four lakhs, fifty seven Thousand, five hundred and fifty six only) under the proviso to Section 11A(1) of the Central Excise Act,1944 against M/s M/s. Magnum Ceramics Pvt. Ltd., Morbi, and hold the same as recoverable from them. 2. Since the said M/s Magnum Ceramics have already paid the amount of Rs. 4,50,000/- voluntarily against the above duty, I order for appropriation of the same towards the demand confirmed against them and hold the balance as recoverable from them. 3. I order recovery of interest at the appropriate rate on the amount of demand confirmed above from the said M/s Magnum Ceramics, Morbi under Section 11AB of the Central Excise Act, I impose a penalty of Rs. 4,57,556/- (Rupees four lakhs, fifty seven Thousand, five hundred and fifty six only) under 11 AC on the said M/s Magnum Ceramics, Morbi. However, I give the option of benefit of reduced 25% of the Central Excise duty with the condition that if entire 7

8 payment alongwith interest and reduced penalty so determined, is made within 30 days from the receipt of the this order. 5. I impose a penalty of Rs. 50,000/- (Rupees Fifty Thousand only) under Rule 26 of the Central Excise Rules, 2002 on Shri Veljibhai Ughreja, Director of M/s Magnum Ceramics, Morbi. 6. I impose a penalty of Rs. 15,000/- (Rupees Fifteen Thousand only) under Rule 26 of the Central Excise Rules, 2002 on Shri Kiritkumar Vasarambhai Patel. 7. I impose a penalty of Rs. 15,000/- (Rupees Fifteen Thousand only) under Rule 26 of the Central Excise Rules, 2002 on Shri Ankur Ganeshbhai Patel. (T. SAMAYA MURALI) Assistant Commissioner F.No.: IV/3-23/D(PI)/11-12 Dated : By Registered Post/Hand delivery to:- (1) M/s. Magnum Ceramics Pvt. Ltd.,Rafaleshwar GIDC, Plot No. 207/25, National Highway 8-A, Morbi (2) Shri Velhibhai Khodabhai Ughreja, Director of M/s. Magnum Ceramics Pvt. Ltd., Morbi (3) Shri Kiritkumar Vasarambhai Patel, Prop. of M/s. Navrang Tiles, Opp. Shekhpir, Sarkhej, Ahmedabad. (4) Shri Ankur Ganeshbhai Patel, Prop. of M/s. Balaji Tiles, Bhavani Peth, Hanumannagar, Solapur. Copy to: 1. The Commissioner(RRA), Central Excise, Rajkot 2. The Superintendent of Central Excise, AR- Morbi 03. Guard File 8